The government is planning to bring steel under the Essential Commodities Act, which provides for control of production, supply and distribution, to curb further price increases, reports Indulal PM.

India’s steel makers are now facing the heat. The steep increase in steel prices and the subsequent government intervention were impacting the investment flow to the sector, an industry executive said.

“We have received letters from foreign institutional investors (FIIs) raising concerns about the government intervention and bringing steel under the Essential Commodities Act,” said MV Sheshagiri Rao, CFO, JSW Steel.

The government is planning to bring steel under the Essential Commodities Act, which provides for control of production, supply and distribution, to curb further price increases and control inflation. Steel prices have gone up by Rs 10,500 a tonne during the last 12 months and by Rs 7,000 a tonne in the last three.

FII holding in the steel sector was diminishing, Rao said.

The expansion plans of the entire steel industry in general and JSW in particular might get affected, he said. "There is a tough credit situation in the foreign market and investors have started going away from the steel sector," he said.

JSW has a Rs 40,000 crore expansion plan over the next seven years. "The financial closure for the first phase of Rs 23,000 crore has already been achieved. But we are facing difficulties in raising money for the second phase," Rao said. JSW plans investments to the tune of over Rs 15,000 crore for the second phase.

Attributing the increase in steel prices to the increase in raw material costs, Rao said coal and iron ore prices had gone up by over 200 per cent during the last 12 months.

The steel ministry has already recommended to the Cabinet Committee on Prices a ban on export of finished steel and a hike in the duty on iron ore exports.

“During the last six months, exports have fallen sharply. We are exporting galvanised steel, which has low demand in the country. We are selling a major chunk of our hot-rolled coils in the country and imports have already fallen due to increased international prices,” Rao said.

Imports of hot-rolled coils have dried up with domestic steel prices being lower than international prices. Steel imports have almost halved between November and January, according to analysts. Hot-rolled coil imports in November were around 322,200 tonnes, coming down to 187,100 tonnes in January, while exports have come down from 122,000 tonnes to 88,000 tonnes.